DEFINITION OF THE TERM ‘ECONOMY’ /

‘ECONOMIC SYSTEM’
 An economy or an economic system refers to the way
society organizes its scarce resources to produce
goods and services to satisfy the needs and wants of
the population.
 It is a system or plan that is put in place by the
government of a country to deal with the problem of
scarcity.
An economy is divided into 2 distinct sectors. These
sectors are:
1. The public sector
2. The private sector

The Public Sector - That sector of the economy that

is owned and controlled by the state/government of a
country.

The Private Sector – That sector of the economy that

is owned and controlled by private individuals
(citizens or foreign investors).
COMPARISON BETWEEN THE PUBLIC AND THE PRIVATE SECTOR
CRITERIA PUBLIC SECTOR
1. MAIN AIM  To maximize welfare of
citizens by providing goods
at the lowest possible
price
2. HOW DO THEY OBTAIN  From government through
FUNDS (SOURCES OF taxation
FUNDS)  Loans from other
countries or financial
institutions
 Grants
3. TYPES OF GOODS  Social goods such as
PROCUCED education, health, roads,
public utilities
4. OWNERSHIP OF  The government controls
ORGANISATIONS and manages these firms
PRIVATE SECTOR
 To maximize profits by
providing goods that would
earn highest profits
 Personal savings
 Inheritances
 Small loans from family
members
 Loans from financial
institutions
 Consumer goods, luxury
items and other goods that
are in high demand
 Owned and managed by
private individuals and
firms
PUBLIC SECTOR ORGANISATIONS PRIVATE SECTOR
ORGANISATIONS
 State Corporations  Sole traders
 Statutory Bodies/Agencies  Partnership
 Central Government  Private Limited Companies
 Local Government  Public Limited Companies
 Nationalised Industries  Conglomerates
 Multi-nationals/Transnational Firms
 Franchises
 Joint Ventures
 Co-operatives